Bally Begins Soliciting Approvals for Chapter 11 Plan

CHICAGO – Bally Total Fitness announced today that it has commenced the formal process of soliciting approvals for a prepackaged Chapter 11 plan of reorganization from holders of the company’s 10 ½ percent senior notes due 2011 and the 9 7/8 senior subordinated notes due 2007. The voting agent must receive votes on the reorganization plan no later than 4 p.m. EDT on July 27, unless the deadline is extended.

Bally plans to continue normal club operations during the solicitation period and throughout the pendency of the anticipated bankruptcy case. If the company does not receive the necessary votes during the solicitation period, it will need to evaluate other options, including filing a traditional, non-prepackaged Chapter 11 case.

The terms of the reorganization contemplated in the restructuring support agreement was announced June 18. Sixty-three percent of the senior noteholders and more than 80 percent of the senior subordinated noteholders signed the restructuring support agreement, which requires that they vote in favor of the reorganization plan after receiving the solicitation materials, subject to certain conditions. Implementation of the reorganization plan is conditioned upon, among other things, the receipt of signed consents from 66 2/ 3 percent in principal amount and a majority in number of the senior noteholders and the senior subordinated noteholders who vote on the plan. If the company receives the requisite noteholder approvals, it will proceed to implement the reorganization plan by promptly filing a voluntary prepackaged petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code as described in the solicitation materials.

Bally also announced that it has entered into a backstop purchase agreement with holders of more than 80 percent of the principal amount of the senior subordinated notes. In the backstop purchase agreement, those noteholders have agreed to subscribe in the rights offering to be made pursuant to the reorganization plan for their pro rata share of $90 million in principal amount of new senior subordinated notes (the “rights offering senior subordinated notes”) and to purchase their respective pro rata shares of any rights offering senior subordinated notes not subscribed for by other noteholders. No offering of the rights offering senior subordinated notes will be made through the solicitation. Any such offering will be made only pursuant to the terms of the reorganization plan, if approved by the bankruptcy court.

“We are pleased that so many of our noteholders have expressed support for the (reorganization) plan and look forward to executing it and emerging promptly from Chapter 11 protection,” Bally Interim Chairman and Chief Restructuring Officer Don Kornstein said in the company’s press release. “The restructuring process laid out in the plan will allow us to maximize our resources and enhance our capital structure, better enabling us to invest in our clubs to meet the needs of our members and thereby facilitate operating performance improvements.”

In another development today, APS Financial Corp., a securities, research and investment banking firm, announced it has discontinued coverage of Bally Total Fitness Holding Corp. High Yield Notes (bond symbol: BFTH).